How do Commercial Institutions Promote Peace: Is it Commercial Integration, Institutional Effects, or Both?

The commercial institutional peace research program has provided empirical evidence that such institutions help reduce the incidence of militarized inter-state conflict. But it remains unclear how commercial institutions produce their observed pacific effect. We examine empirically three different arguments that might explain the commercial institutional peace. First, commercial institutions increase the economic opportunity costs of war for the state. Second, some commercial institutions provide information about other states’ military capabilities, which may make bargaining for peace more efficient. Third, many commercial institutions bring high-level state leaders together on a regular basis, building trust to overcome the commitment problem in international bargaining. Our statistical results show the greatest empirical support for the third explanation: commercial institutions with more organs for high-level state leaders demonstrate a substantively strong and statistically significant effect in reducing the outbreak of military conflict. We find some limited support for the second explanation, and no support at all for the first explanation. [ABSTRACT FROM AUTHOR]